In a testament to the growing demand for bonds, Kenya’s recent Eurobond offering has attracted an impressive response, gathering over $5 billion in subscriptions.
According to reports from Bloomberg, Kenya is set to issue $1.5 billion worth of seven-year bonds at a rate of 10.375%, marking the highest coupon payment made by an African issuer so far this year.
The decision to tap into the international bond market comes as the Kenyan government seeks to raise funds to facilitate the redemption of $2 billion worth of securities reaching maturity in June. Additionally, the issuance of these new bonds is expected to extend the average maturity period of Kenya’s existing debt portfolio.
While the pricing of the bonds fell below the initial guidance of approximately 11%, it remains significantly higher compared to the rates at which other African sovereigns have issued debt this year. For instance, Benin issued a 14-year instrument at 8.375%, while Ivory Coast secured funds at 8.5%.
The move comes amid financial strains for Kenya, with approximately $5.2 billion in foreign debt obligations, including both principal and interest payments, due this year. Additionally, there is an additional $2.7 billion set to mature in the upcoming fiscal year. To meet its refinancing requirements, Kenya needs market access to avoid tapping into $7.1 billion of foreign-exchange reserves. Such an action could negatively impact the country’s economic indicators and weaken its financial position.
The increased demand for bonds with higher interest rates comes amidst expectations of a cut in interest rates by the US Federal Reserve. For instance, Benin Republic’s 14-year USD bonds issued at a rate of 8.375% received an oversubscription of $4.25 billion. Meanwhile, Cote D’Ivoire’s sustainable and conventional notes, issued at rates of 7.875% and 8.5% respectively, received an overall subscription of $8 billion, raising $2.6 billion and representing a total oversubscription of $5.4 billion.
By: Delino Gayweh
Serrari Financial Analyst
February 14, 2024
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